A huge mistake that many of us do is that we work hard our entire life and never manage our finances properly. Wise money management can take a lot of worry out of your life. You can either manage your finances yourself, or you can hire a financial advisor. Nowadays, with online platforms like StarOfService, hiring professionals has become a cakewalk.
To know your financial situation well and plan accordingly for the future, you can review your finances over a period of time. Most people prefer to review their monetary status over a year. You might have stayed rigid to your yearly budget and made additional incomes, but there are always external factors that affect your finances to some extent. A family contingency, change in market circumstances and national economy models distort your financial plans and status. And, hence it is important to review your finances regularly.
Targets Achieved– You begin your year with a target in the mind. You plan of buying a new car, investing in a home, or increasing your savings. Over the year, you might have or might have not achieved some of your initial goals. When at the end of the year, you sit and analyze your financial activities for the year, it tells you whether you’ve been able to achieve your goals, how much have you fallen behind and how much you need to make up for in the coming year. In a way, it also gives you a clear picture of what you can achieve in a year and how to prepare a plan for the next year. It is always important to make realistic, achievable plans so that they can be realized easily.
Personal Factors– So, once you know whether you have achieved your decided targets or not, it also becomes evident what were the factors that influenced your financial position for the year. One thing that affects your monetary quite directly is the personal changes in your life. Death of a close one, birth of a child in the family, health issues, marriage, and other personal expenditures drain your finances substantially. On the other hand, inheriting an ancestral property, having an additional earning hand in the family are factors that raise your income levels. It is important to analyze all these factors at the end of the year.
Market Changes– Another important factor that affects your personal finances is the changes in the national economy and market conditions. A classic example would be the current demonetization of the 500 and 1000 currency notes in India. With such a phenomenal change in the economy of a country, disturbances in personal finances and individual budgets are quite obvious. Changes in the stock market too cause huge changes in individual financial positions. Knowing what external factors affected your personal finances this year, help you plan better and invest better in the next year.
Assets and Liabilities– Revisiting your financial position at the end of the year is important for another reason. It gives out a clear picture of your assets and liabilities at the end of the year. During the year, you might have acquired some big assets, say a house or a car. And, at the same time, you might have taken loans for the same. You might have also taken a personal or educational loan, or cleared your past liabilities. It is important to know whether your assets exceed your liabilities to plan your future investments wisely.
Insurance Cover– We all invest a part of our incomes in insurance. It is an expense that sometimes feels unnecessary. But your insurance cover always takes care of a stressful situation when the unexpected happens. Over the year, your insurance needs might change. At the end of the year, you should be aware of your increased or decreased insurance cover needs so that you can then renew your cover accordingly.
Financial review actually takes you closer to a more organized lifestyle. Wise money management is not a rocket science. All you have to do is set your financial goals, make a realistic budget, plan to save and review your finances regularly.